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CBN: Inflation’ll weaken economy

The country’s economy would end up weaker if prices start to rise faster than they do now, the Central Bank of Nigeria’s Inflation Attitudes Survey (IAS) Report for Q3’20 shows. This is just as the apex bank has reviewed the controversial policy on foreign exchange transactions by a third party. According to the survey result posted on the apex bank’s website yesterday, “62.1 per cent of the respondents believe that the economy would end up weaker, 9.0 per cent stated that it would be stronger, 12.6 per cent of the respondents believe it would make a little difference, while 16.4 per cent did not know.

“The responses showed considerable support for price stability, as majority (62.1 per cent) agreed that the economy will end up weaker. This is consistent with the notion that inflation constrains economic growth.”

The report further stated: “When asked how prices have changed over the past 12 months, respondents gave a median answer of 5.3 per cent. Of the total respondents, 3.5 per cent thought prices had gone down or not changed, 73.7 per cent felt that prices had risen by at least 3.0 per cent, while 21.5 per cent felt that prices inched up by more than 1.0 per cent, but less than 3.0 per cent. Those that had no idea were 1.4 per cent.

“The median expectation of price changes over the next 12 months was that prices would inch up by 4.0 per cent. From the total responses, 59.7 per cent of the respondents expected prices to rise by at least 3 per cent over the next 12 months, 21.8 per cent expected prices to increase by more than 1 per cent, but less than 3 per cent. However, 16.4 per cent of the respondents were optimistic that prices over the next 12 months would either decline or remain the same.”

On interest rates, the report stated: “The percentage of respondent households who felt that interest rates had risen in the last 12 months increased by 10.0 points to 35.3 points in the current quarter when compared to 25.3 points reported in Q2, 2020. On the other hand, 8.3 per cent of respondents believed that interest rates had fallen, while 43.4 per cent of the households had no idea. The result revealed that majority of the households had no idea on the direction of interest rates in the past 12 months.

“On the expected change in interest rates on bank loans and savings over the next 12 months, 29.8 per cent of the respondents were of the view that the rates will rise, while 16.7 per cent believed that the rates will fall. However, 40.6 per cent of the respondents had no idea.”

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